Mallinckrodt PLC (MNK) Boasts 84% Upside Potential After Making a Well-Played Grab for Sucampo

Cantor's Louise Chen sees two late-stage rare assets gained from MNK's takeover of Sucampo poised for positive outcomes.


Mallinckrodt PLC (NYSE:MNK) has stirred a few more bullish thoughts from Cantor analyst Louise Chen on the heels of its Sucampo deal, with Chen continuing to believe the probability is not high for another biotech player to steal in and acquire SCMP. A lot of questions have been circling the takeover news, and Chen continues to be confident on the drug maker’s opportunity ahead, especially after a catch-up with the MNK management team.

In reaction, the analyst reiterates an Overweight rating on MNK stock with a $42 price target, which implies an 84% upside from current levels. (To watch Chen’s track record, click here)

“It is not likely another company would step in for SCMP, based on how the deal documents read and our own diligence,” asserts the analyst, who calculates that the company’s EV/EBITDA will fire up from 5.4x to 5.8x on back of the SCMP deal.

With a constipation asset like Amitiza gained from the Sucampo deal, the analyst beliefves, “MNK discounted the value ascribed to SCMP’s pipeline assets, but having a product like Amitiza allows it to limit the purchase price risk.”

With Sucampo’s pediatric sNDA for the constipation drug set for January 28th of the new year, the analyst does not see this as either a “meaningful catalyst” nor a “downside” to MNK shares.

Therefore, though Mallinckrodt’s biggest asset Acthar, a gel that treats infantile spasms as well as multiple sclerosis has disappointed the market with sinking sales, with “M&A [in] focus,” this could be precisely what the biotech company needs to shake up investor sentiment back in its favor.

Looking at the other pipeline assets MNK gains in the Sucampo deal, from CPP-1X/sulindac to VTS-270, these rare disease candidates keep this bull rooting for Mallinckrodt’s success: “Prior studies and published papers support positive Phase 3 outcomes for CPP-1X/sulindac and VTS-270.”

TipRanks underscores a cautious analyst consensus with hints of optimism, as out of 14 analysts polled in the last 3 months, 5 are bullish on MNK stock and 9 remain sidelined. With a return potential of nearly 43%, the stock’s consensus target price stands at $32.55.